Is crypto back? Bitcoin ETFs and the crypto bull market in 2024

The importance of Bitcoin ETFs and what I'm doing with my portfolio.

written by oz chen

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I always know the crypto bull market is back when I hear people bring it up in everyday conversation. I’ve been hearing it at the coffee shop, and even my brother-in-law asked about it.

The market was silent in the aftermath of Sam Bankman-Fried and the rash of crypto exchange failures.

Now, it seems excitement has come back. And not without good reason: crypto has performed really well in 2023, handily beating the stock market.

As the price of Bitcoin and other cryptos steadily increase; these high(er) prices attract attention.

In recent months, the biggest buzz has been around potential approvals for a spot Bitcoin ETF.

What are spot ETFs and what do they mean for crypto?

It’s helpful to first understand the purpose of an ETF.

Exchange traded funds (ETFs) are investments that trade like stocks, but represent something other than regular stocks, like:

  • A basket of stocks, like a sector (technology) or theme (environmentally sustainable)
  • An investing strategy like futures, leverage, inverse ETFs
  • Assets that are hard to buy yourself: commodities (oil), gold, and yes…Bitcoin!

ETFs are especially a big deal for emerging assets like Bitcoin because they make it far easier for individuals and institutions to buy them.

Imagine a company that manages all of its investments through a broker, like Fidelity. If they wanted to get into crypto, they would have to leave Fidelity and onboard onto a platform like Coinbase. That requires a level of due diligence, security and updated legal/tax processes that adds operational risk to this investment. (The 1 crypto bro pushing for this at his company is really going to have to stick his neck out to convince everyone to do this.

Then imagine suddenly, that same company sees a Bitcoin ETF available to buy in their Fidelity account.
Boom, done. The same crypto bro has less convincing to do.

Note: while it’s true that Bitcoin-linked ETFs like “BITO” have existed for some time, these are derivative type of investments that bet on the PRICE of Bitcoin. A spot Bitcoin ETF is a fund that will actually buy and hold Bitcoin.

Naturally, it’s bullish news when Fidelity, one of the biggest money managers, applies to list their own Bitcoin Spot ETF. Several other giants like Blackrock and Invesco also want in.

Tl;dr: Because ETFs lower the barrier to investing in certain assets, an approved Bitcoin ETF could bring a lot of investment dollars in.

Imagine if 401K accounts offered a Bitcoin ETF. Even if people started putting 1% of their retirement towards crypto, that could bring a flood of money into crypto that would’ve otherwise been invested in stocks.

Buyer beware!

The crypto market is more volatile than the stock market. As with any investment, you can lose money.

For anyone who endured the crypto bloodbath of 2022, it is a new asset class that’s still maturing. There may be more Sam Bankman-Frieds and Celsiuses and Voyagers, BUT…

ETFs bring in a level of institutional adoption that can stabilize the market, provide regulatory clarity, and ultimately, help further legitimize crypto as an asset class.

I’ve been sitting on my crypto portfolio

After being burned by losses from 2022’s fiasco, I hesitantly turned off my recurring buys for 50% Bitcoin, 50% Ethereum.

(Part of my fear was simply that the exchanges I was using for my recurring buys will go bust.)

It was a hard decision to stop putting more money into crypto when it was the cheapest. Even though the best time to invest is usually soon after major catastrophe, for example the stock market post 2008.

But here’s the thing: I never sold my stash either. I’ve been a long term holder and had the conviction (delusion?) that the crypto market will be back.

From a portfolio perspective, I knew that I shouldn’t get too greedy. I already had more than I was comfortable with in crypto, and didn’t need the money.

Thank goodness for diversification.

What does this mean for investors?

This is not investment advice. If you were interested in getting exposure to Bitcoin and other cryptos, try to use a portfolio mindset:

“What percentage of my money would I be comfortable putting into a volatile investment?”

And if you don’t want to wait for a Bitcoin ETF to be approved, then you can always get a sign up bonus with these crypto exchanges and dip your feet in.

No one can predict the future, but I feel that 2024 is poised to be a big, exciting year for crypto.

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